June 18, 2024

South African investment in new-energy vehicles

3 min read

Between 2021 and 2022, worldwide sales of battery-powered vehicles rose by 108%, totalling a whopping 6.75 million units just last year.

Here in South Africa, growth was not as expansive with only 3 092 new-energy vehicles (NEVs) sold in the first nine months of 2022. This is, however, an impressive increase compared to the 896 NEVs sold during the full year in 2021 and may represent a positive forecast for sales in 2023.

Even though electric vehicles are becoming more widely accepted, we have one of the lowest electric vehicle ownership rates in the world. This is despite the fact that new-vehicle sales in South Africa have continued to recover from the impacts of the pandemic, with 41 783 units sold in December 2022 – an 16.2% increase compared to the same period in 2021.

Likewise, according to the National Association of Automobile Manufacturers of South Africa (Naamsa), new passenger cars experienced the strongest growth with 28 793 units sold – a 15.4% jump.

One of the main themes at the inaugural SA Auto Week in October last year was therefore how South Africa will navigate the shift to new-energy vehicles (both fully electric and hybrid vehicles).  

Given that the automotive industry is one of the highest carbon (CO2) emitters worldwide, responsible for around 20% of total emissions, electric vehicles are vital to reducing carbon emissions and reducing levels of air pollution. One electric car saves approximately 1.5 million grammes of CO2 in a year.

Additionally, the war in eastern Europe and ongoing market volatility mean fuel prices are unlikely to subside over coming months. This is on top of sharp increases seen over the past few years, with South African fuel prices almost doubling from 2017, when 95 octane petrol inland cost R12.86 per litre compared to the official R21.68 per litre in February 2023.

From an environmental and economic perspective, electric vehicles will therefore ultimately be the way of the future.  

South Africa’s slow uptake is due to several challenges. For example, according to Naamsa president Neale Hill, there is still a particular lack of clarity about South Africa’s investment drive to transform the automotive industry to manufacture new electric cars.

In terms of policy, South Africa offers limited subsidies for driving the acceleration of the electric vehicle market. The Department of Transport did introduce the Green Transport Strategy, which provides key incentives to produce and sell electric vehicles, but as part of a global industry, the domestic automotive industry cannot afford any delays.

In fact, Minister of Transport Fikile Mbalula outlined obstacles impeding progress, of which the biggest one is cost. He further noted that incentives had not been implemented yet, including the national tax regime for electric vehicles, which has led to a barrier in trade.

We urgently need to create incentives for manufacturing vehicles. We also need to decrease the 25% import tax on importing electric vehicles, as high tax levels are placing electric cars firmly out of the reach of typical households.

The automotive sector must play a vital part in the global electric vehicle value chain. In 2021, the Department of Trade, Industry and Competition released an Auto Green Paper to create a clear policy foundation that outlines investment and a tax system. This policy must be used to build a resilient raw material supply chain that supports the country’s efforts to be a global player.

By Mpho Dipela, chairperson and shareholder of Legacy Motor Group

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